French economy - Accounts and files2014 Edition

“French economy - Accounts and files” presents every year a summary of the evolutions
of French and international economies. Based on national accounts, this book analyses
the main events which happened in 2013.

Wage resilience in France since the Great Recession

From 2009 onwards, the slowdown in French real wages was less acute than that in labour
productivity, which pulled French firms'margin rate down, falling to its lowest level
since
1985. How can this resilience of wages be explained? Econometric models of wages show
that it is usual for a slowdown in labour productivity not to be passed on in full
to wages, but
also that this mechanism is not sufficient in itself to explain the recent disconnection
between real wages and productivity. Two potential explanatory hypothesis are sometimes
proposed for this disconnection: a change in the labour force structure driven by
greater job losses among lower-paid workers, and downward nominal wage rigidities
for those
employees who have not changed companies.
At the end of 2008 and in 2009, the fall in employment was accompanied by a change
in the labour force structure. With a decline in the proportion of less qualified
employees, job
separation among those earning the lowest wages thus contributed to buoying up the
average wage. Excluding employed population structure changes during the crisis, average
wage would have grown by 0.7 points less each year between 2009 and 2012. However,
the
rise in the qualification level of the working population was already making a positive
contribution towages of 0.4 points per year prior to the recession. The effect of
the change in
composition due to the recession therefore seems quite weak.
In parallel, almost no downwardwage rigidities were observed. For those persons remaining
in the same firm, a significant amount of wage dropped, while wage freezes are rare.
In
addition to this, those enterprises that suffered a specific fall in their activity
in 2009 adjusted wages downwards and these reductions were greater in scale, on average,
than the
price rises granted by companies whose activity improved. Nominal rigidities therefore
cannot explain the inertia in wage dynamics, as shown by a macroeconomic analysis
of
wages.